Each ranch operator must figure his herd’s economic base when launching a drought management plan. And in many parts of the country, a drought management plan is a necessity today, says Market Advisor columnist Harlan Hughes.
These figures correspond with the September 2012 Market Advisor column. Read the column here.
Corn prices are projected to drop some with the 2013 corn crop, but 2012 calves will be finished with 2012 corn. Figure 1 depicts the volatility of corn futures prices.
The market impact of rising feedlot cost of gain (COG) is negatively impacting 2012 feeder cattle prices. Ranchers should note, however, that while feeder cattle prices are substantially down currently, fall 2012 feeder calf prices are still projected to equal last year’s prices. Last year’s beef cow profits, while not record high, were quite favorable. Figure 2 presents my projected fall 2012 planning prices (as of mid-July).
Figure 3 summarizes the traditional marketing alternatives for 2011 and presents my current projections for 2012 calves. Current feed cost projections have increased the cost of production for all marketing alternatives (see the two COG columns).
The foundation ofany beef herd’s economic analysis has to be that herd’s performance data. Figure 4 presents my suggested critical herd performance measures.
The best way to get a handle on the winter feeding program is to convert all forage consumed to “tons of hay equivalent." The actual pounds of forage fed are adjusted to “dry matter pounds”; then, the total dry matter (lbs.) of all forages is converted back to tons of hay equivalent.
Figure 6 summarizes all feed costs associated with the 2011 study herds. Winter forage costs totaled $149/cow. When summer pasture costs and all other feed costs are accounted for, the total market value of all feeds fed was $303/cow for the 2011 calves.
Figure 7 lists my suggested categories making up the livestock costs. In 2011, these livestock costs totaled to $89/cow. (Breeding costs here are for artificial insemination only, as bull costs are imbedded into the herd’s overall cost structure.) I don’t project livestock costs to change much in this 2012 drought year.
Figure 8 presents my suggested overhead cost categories, which average $84/cow for the study herds. Again, this is only the share of these costs allocated to the beef cowherd. I don’t expect these costs to change from the 2011 to the 2012 calf crops.
Figure 9 presents my economic summary for these 2011 Northern Plains herds. Gross income averaged $941/cow, and total costs of production averaged $767. The economic net returns – return to unpaid labor, management, and equity capital – averaged $175/cow.
Figure 10 puts my 2011 actual returns and my projected 2012 returns per cow in perspective to historical returns. Note the impact of the 2002 drought and also the 2006 drought. The current drought will also have its economic impact.